Dubai and Abu Dhabi Economic support to minimize the impact of COVID-19

Dubai economic stimulus package

Dubai Government launched an AED 1.5 billion economic stimulus package for the next three months to support companies and the business sector in Dubai. The package seeks to enhance liquidity and reduce the impact of the current global economic situation.

The stimulus package developed by Dubai Government includes 15 initiatives focused on the commercial sector, retail, external trade, tourism and the energy sector. The package is expected to have a direct and indirect positive impact on all other sectors as well, over the next three months.

  • Dubai Government has introduced a freeze on the 2.5% market fees levied on all facilities operating in Dubai.
  • The second initiative extends a refund of 20% on the customs fees imposed on imported products. This initiative already started with the notice of number 01 – 2020 by the Dubai Customs on 19 March 2020. Duty refund is valid for custom duty imposed on imported goods and sold locally in UAE markets, which are subject to duty rate of 5% and have been processed under import declaration during the period from 15th March to 30th June.
  • The package also includes the cancellation of the AED 50,000 bank guarantee or cash required to undertake customs clearance activity.
  • Bank guarantee or cash paid by existing customs clearance companies will be refunded.
  • Fees imposed on submitting customs documents of companies will be reduced by 90%.
  • Exemption to traditional wooden commercial vessels registered in the country from mooring service fees for arrival and departure, and direct and indirect loading fees at Dubai and Hamriyah Ports.
  • Cancellation of 25% down payment required for requesting installment-based payment of government fees for obtaining and renewing licenses.
  • Permission to renew commercial licenses without mandatory renewal of lease contracts.
  • Reduction of municipality fees imposed on sales at hotels from 7% to 3.5%.
  • Exemption from fees charged on companies for postponement and cancellation of tourism and sports events scheduled for 2020.
  • Freeze on the fees for classification/rating of hotels.
  • Freeze on the fees charged for the sale of tickets, issuance of permits and other government fees related to entertainment and business events.
  • Reduction in water and electricity bills by 10%.
  • Reduction in deposits paid for water and electricity connections by 10%.

You can refer Dubai Customs initiatives on the above through below link.

Dubai Free Zones economic stimulus package

Dubai Free Zones Council announced an economic stimulus package to complement the Dubai Government’s efforts to overcome the COVID-19 situation. The economic stimulus package, in coordination with the Dubai Free Zones Council, include: Dubai Silicon Oasis Authority, Dubai Airport Free Zone Authority, Jebel Ali Free Zone, Dubai World Trade Centre, Dubai International Financial Centre, Dubai Development Authority, Dubai South, Meydan City Corporation, and Dubai Multi Commodities Centre.

Dubai Free Zones Council’s package contributes to strengthening and supporting Dubai’s businesses by reducing the impact of the spread of COVID-19 on the economic situation. It includes five key elements. They are:

  • Postponing rent payments by a period of 6 months.
  • Facilitating installments for payments.
  • Refunding security deposits and guarantees.
  • Cancelling fines for both companies and individuals.
  • Permitting temporary contracts that allow the free movement of labour between companies operating in the free zones to continue for the rest of the year.

Further, DIFC proposes implementing five initiatives over the next three months, which centre on enhancing its efforts to support companies during these exceptional circumstances. Initiatives include,

  • Waiving annual license fees for new companies during the next three months.
  • 10% discount on renewal fees for existing licenses during the same period.
  • Companies will enjoy additional facilities, such as the postponing of payment plans for all commercial properties owned by DIFC Investments for a period of 6 months.
  • DIFC will reduce its ownership transfer fees from 5% to 4% for any property sale that occurs within the period from April to June.

Related linksDubai Free Zones Council launches economic stimulus package 

Abu Dhabi economic stimulus package

Abu Dhabi is providing a dynamic economic stimulus package to support economic activity, reduce the costs of living, facilitate business in the emirate and protect the UAE’s economic stability.

The economic stimulus package includes the following initiatives:

  • Continuing with all approved capital expenditure and development projects in the emirate, as well as with further measures to preserve Abu Dhabi’s economic gains, prioritising startups and SMEs.
  • Formulating plans to stimulate strategic investment sectors and to form a new committee headed by Department of Finance, with members from Department of Economic Development and local banks to review lending options to support local companies.
  • Developing investment laws and regulations and ensuring their flexibility to maintain Abu Dhabi’s progressive economic development.
  • Allocating AED 5 billion for water and electricity subsidies for citizens and the commercial and industrial sectors, with an intention to reduce the cost of living and support businesses, as well as subsidising electricity connection fees for startups until the end of the year 2020.
  • Allocating AED 3 billion to the SME Credit Guarantee Scheme managed by Abu Dhabi Investment Office (ADIO) to stimulate the ability of SMEs to navigate the current market environment.
  • Allocating AED 1 billion to financial markets to establish a market maker fund, to enhance liquidity and sustain balance between supply and demand for stock.
  • Exempting all commercial and industrial activities from property registration (Tawtheeq) fees levied by the municipality.
  • Exempting individual and commercial real estate registration fees for this year.
  • Suspending bid bonds and exempting startups from performance guarantees for projects up to AED 50 million.
  • Not charging annual vehicle registration fees for commercial vehicles and not levying traffic toll for all vehicles.
  • Offering up to 20% rebate on the rental value of the restaurant, tourism and entertainment sectors.
  • Suspending tourism and municipality fees for the tourism and entertainment sectors for this year.
  • Settling all approved government payables and invoices within 15 working days.
  • Waiving all current commercial and industrial penalties.
  • Reducing industrial land leasing fees by 25% for new contracts.

Other references and related news articles

Promising SME’s funding avenues in UAE.

Operating a SME can be stressful with the pressure of an economic downturn. The outbreak of the coronavirus has slowed the global economy and most companies are in a state of flux. As this epidemic evolved to a pandemic, it is projected that this ordeal may last for considerable period. In the face of this uncertainty, many Small Medium Enterprises (SME’s) are already struggling to maintain their financial stability. What relief is available for these companies?

Funds, although money cannot fix all the problems in your business, having enough funds can help you with your business stability and growth.

Thus, we put together a list of SME funding avenues in the UAE to help entrepreneurs make their venture a success.

Private funding

Your family, relatives and friends are always a good way to find funds for your businesses. You can ask for someone close in your life to loan some money or get them to join your idea by offering shares of your business. This is the commonly happening funding avenue for most SMEs all over the world. In this method, less complex and easy to access is the key. As many SMEs not able to comply with requirements to have funding form outside parties.

But with this, there is always the risk of ruining your relationship with your friends or family members if your business plan goes sideways.

Crowd funding 

This is one of the best ways to attract private investors to fund your business idea. You need to pass-through screening process of your business by the platform providers to eligible to your business to attract investors. This method is very popular among new generation as it involves digitally present your business idea or business to many investors strongly. In many cases platform facilitate in digitally to meet inventors and business owners. You will have to have strong social media campaigns to promote your business idea to generate interest. There are many crowd funding platforms you can use for this. Some of the UAE Crowd funding entities with web address are mention below for your easy reference.

Government support

The UAE government also offer several funding schemes for small businesses. UAE has identified SME sector as the key to economic development, and taken many initiatives to facilitate SME business owners. In particular UAE is welcoming new innovations and invest more on technology over the past years. There are many funds allocated to help SMEs and some of them are named below for your reference.

  • Khalifa Fund
  • Mohammed Bin Rashid Fund for SME

These funds often take interest in a project that helps the local economy such as projects in agriculture, Technology, fishing, farming and home-based businesses.

Venture capital and angel investors

Venture capital and angel investors invest in businesses in exchange for equity. Such investors are often experienced entrepreneurs thus will only be interested in business ideas that have long term expansion potential. You need to exchange your business ownership to third party and they will also will involve in the management of the business functions. You are capable of getting more structured entity with these types of investments. Further, you need to have proper business setup with all compliance as the venture capital will evaluate your business or idea covering all the aspects of your business.

When you are approaching a venture capitalist or an angel investor it’s important that you perfect your pitch and learn your numbers well.

Asset financing

Asset financing is short term loan use to finance tangible or movable assets. This includes vehicles, equipment, storeroom or machinery required for the day to day activities of your business. This is one of the popular funding avenues among SME’s in UAE over the past years, to fund the assets they needed for their business. When you have confirmed business and need funding on the fixed assets you can look for this solution and the rate of borrowing cost also less compared to other business loan. You need to provide asset ownership as collateral to the bank. Comparatively less paperwork.

Bank loans

Although bank loans are not the easiest to obtain, you can’t discount bank loans given the stability it can offer you. Make sure you have a good credit score before you apply for a bank loan to increase your chances to get your loan passed. Normally you need to have a good record of running business activities for some minimum period and it is difficult to get funding for newly started business. Interest rate would be high compared to other methods. In some cases, you need to get help of a consultant to provide and prepare your entity information to submit loan application. In this case you need to provide audited financial statements for funding institution from bank approved auditors.

To know more about how you could fund your SME, please refer and we can guide you to keep running with your business.

How to protect your business from COVID-19 challenges.

It is a challenging time for all due to the COVID-19 pandemic. As a business owner, you have to look at things differently, as the business environment has changed significantly and most part of it is not under your control. Still there are things which you can do and which will help you to continue your business.

Disclaimer – This article, we will try to touch problems we feel going to face by the business’s owners. It is not our intention to diminish the seriousness of the situation with COVID-19, nor to morbidly capitalize on the fear. Our duty is to prepare businesses for real problems they may face and help them to overcome the problems.

1. Understand your financial position

This is very important to know your numbers as of now. This is the key to assess your ability to continue and know your problems. Unfortunately, many SME’s does not give importance to keep up to date financial records. This will lead to many uncertain situations and if you have not updated your numbers, please do so. You may need a help of a chartered accountant to present your numbers and obtain the service if you are not an expert in financial numbers.

Once you have financial reports, (Balance sheet, income statements and your cash flow statement) you will be able to understand how healthy your business is in terms of continuity. Today all big firms have issued guidelines to their staff to look into the ongoing concerned issues with other parameters to evaluate the going concern issues due to COVID-19 when concluding audits as of 31st December 2019. Hence, when preparing your financial statements as of 31st December 2019 or as of today, you need to consider and plan for the future with the economic downturn.

In this current situation, look at the working capital requirement and not for its profit. Sometimes your business record may have a good profit or revenue does not help at this time as now all businesses needs to consider how much they are strong in terms of working capital requirements to continue the business. Working capital reveals a great deal about the financial condition, or at least the short-term liquidity position of a business.

Working capital is more reliable than almost any other financial ratio or balance sheet calculation because it tells you what would remain if a company took all its short-term resources and used them to pay off all its short-term liabilities. All being equal, the more working capital a company has on hand, the less financial strain it experiences.

Working capital = Current assets – Current liabilities

If you are in a negative position, you are already in a problem and it will make further difficulties in future due to the downturn of the business activities. You need to improve the same.

If you are in a positive position, try to make it even stronger.

Let us consider what can improve your working capital position and what can you do regarding it.

a). Try to convert all your current assets to money. First thing you need to do is get the list of trade receivables and try to get the money from your trade debtors. This is challenging as all the businesses are now trying to do the same thing. At least you need to get a confirmed date that your customer will pay your outstanding invoices, so you can predict your cash flow. Second, selling your inventory and analyze your products and make a plan to sell as much as possible to genuine customers, even with good discounts at this time. It will make you better position.

b). Obtain a list of payables and make a plan to pay. If you have good working capital conditions, please pay your suppliers on time as usual and that is the best thing you can do to help business community at this difficult time. If you are not in good position, talk to them and agree on the time frame so that they can expect money in a particular time frame and you also will be able to manage till that time. In this way, you have some predictions on the time frame of money coming in and going out.

c). Look for working capital funding. You need to start early as possible as if your current working capital position is negative, and above a) and b) is not working then you need to find a way to pump money into the business for a minimum 3 months and better to have a plan for 6 months, as nobody can predict exactly how much time it will take to have a normal business environment. You need to predict your monthly working capital requirements and try to fund the gap. This includes securing bank loan, obtain credit card loan, obtain mortgage loan, selling your unwanted fixed assets and investor funding (Talk to your partners now, explain to them the current situation and expectations) is some of the options available.

2. Diversify your Service or Product Offering

Due to the COVID-19 impact, general public has to comply with health authority guidelines and instructions. This will create new opportunities to business communities to change the way that businesses are operating now. E-commerce will become more important than any other time in the history. Current conditions will create new avenues to do the business and look around your business and change the channels to meet the customers’ requirement.

Think on the requirements which are newly created by the current environment and customers’ needs and apply to your business line. Some of examples,

  • If you are a distance higher educational institute, increase your marketing.
  • If you are in operating grocery or restaurant, increase delivery services with the approval of the relevant authority.
  • If you are an advertising agency and want to help a broader customer base, offer prerecorded online training courses to help shore up your clients marketing and advertising skills.
  • If you offer low cost graphic design services,  offer a premium service for more mature businesses.
  • If you are an operational efficiency expert, offer a subscription for the tool you built and use to document processes.

Spend some time thinking about what you can do to minimize your risk by creating new revenue streams.

3. Make a plan to work from home

Work from home is actually performing in many countries and many people have a private office in their home. It only needs a computer or a laptop an internet connection for many employees. Due to the current situation of COVID-19, some managed to understand the problems, predict the situations properly and spend money on the training staff to work from home. Most of them built the setup and is currently running the show from home to a satisfactory level. Unfortunately, some of the employees are not able to access the records where they need to perform the tasks due to not having required devices. Hence planning for the same is very important and it will help you to run the operation with minimum disruption.

Before you grow a remote team, it is important to put a few things in place:

Write clearly defined policies – We Creavty, put all in places and have clearly communicated to all our staff in Sri Lanka and UAE to follow the guidelines.

Employ the best technology – When we first allowed our team to work remotely, we need to put right technology available with the team. We as a digital firm, Crevaty use below tools for the work.

  • Accounting: Xero
  • Project Management: Bitrx 24
  • Internal Communication: Skype for business / Zoom
  • Data Sharing; Western Digital my cloud

While this list might not work for everyone, it has served us very well. We no longer have to be in an office with a dedicated server for our accounting software, because we use a cloud-based accounting software. We don’t have to use emails or spreadsheets to track projects, because Bitrix 24 does it all. All of our chats are in one spot, rather than hiding in Google or other systems.

Finally, we want you all to prepare for the future with the challenges and we believe together we can overcome this current situation. We will be again with our loved families, friends and business communities as normal once this pandemic is over.

If you need any help on planning your business to face upcoming challenges, we can assist you. Please visit our website to know more about our services